Nobody wants to be in the fixed-line telephony business anymore, and China Telecom
China Telecom and China Netcom
Adjusted revenue in the second half of the year grew almost 7%, but operating profits were down 7% and EBITDA was up just 1%. The company saw robust double-digit growth in both its Internet and value-added services (including ringtones), but those are still small contributors relative to telephony.
China's fixed-line operators continue to lose business to mobile operators like China Mobile
This will change eventually; either China Telecom will get the approvals it needs, or it will try to acquire its way into the markets. I expect the regulatory decisions, particularly on the 3G license, to come soon, to ensure that the systems are up and running in time for the 2008 Summer Olympics in Beijing.
Of course, the Chinese government's decisions will influence other companies like UTStarcom
China Telecom's stock isn't exactly widely loved, which suits me just fine. True, the company's more traditional businesses should weaken in 2006, and there's always the risk that investors have become too enamored of China in general. Despite this, I don't think today's price is too bad, relative to future potential.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).